Axis Finance Ltd vs Cyquator Media Services Pvt. Ltd. ...
2021 Latest Caselaw 4746 Bom

sat                                                                 6. ial 4696-2021.doc


                  IN THE HIGH COURT OF JUDICATURE AT BOMBAY
                      ORDINARY ORIGINAL CIVIL JURISDICTION

                    INTERIM APPLICATION (L) NO. 4696 OF 2021
                                      IN
                   COMMERCIAL SUMMARY SUIT NO. 14 OF 2021

      Axis Finance Ltd.                                         ...Plaintiff
            vs.
      Cyquator Media Services Pvt.Ltd. & Ors.                   ...Defendants

      Mr.Karl Tamboly with Tomu Francis and Taha Mirza i/b. Khaitan & Co. for
      Plaintiff/Applicant.
      Mr.Prathamesh Kamat with Ashish Bhakta, Shreni Shetty and Krusha
      Maheshwari i/b. ANB Legal for Defendants.

                                        CORAM : S.C. GUPTE, J.

                                        DATE     : 16 MARCH 2021

      P.C. :

                  Heard learned Counsel for the parties.


      2           This interim application is an application made under Order 38

Rule 5 of the Code of Civil Procedure seeking attachment before judgment or reliefs in lieu thereof. The Applicant/Plaintiff claims to be a creditor of Defendant No.1 company, having extended a line of credit to it by way of a term loan. This loan is said to be inter alia secured by pledge of equity shares by Defendant Nos.2, 3 and 4. The Plaintiff's case is that there was a default on the part of Defendant No.1 in repayment of the loan. It is submitted that whilst the Applicant is in the process of selling and releasing the pledged shared, Defendant No.1 has devised a scheme of amalgamation with one Sprit Infrapower & Multiventures Pvt.Ltd. ('Sprit'), which scheme is nothing but a device to obstruct or delay the execution of the decree that

sat 6. ial 4696-2021.doc

may be passed in favour of the Plaintiff in the present suit. It is submitted that both Defendant No.1 and Sprit are highly debt ridden companies, though so far as Defendant No.1 is concerned, it has, on its own showing, adequate assets to take care of its liabilities. It is submitted that the liabilities of Sprit far outweigh its assets and if the scheme is approved, the ability of Defendant No.1 or amalgamated company, as the case may be, to pay off all the debts of its creditors including the Plaintiff herein, would be severely prejudicially impacted. The Plaintiff accordingly submits that Defendant No.1 is in the process of disposing of its properties, by virtue of the proposed scheme of amalgamation, with an intent to obstruct or delay the execution of the decree that may be passed by this court in the present suit.

3 As the outset, it needs to be noted that any consideration of the scheme of amalgamation and any relief concerning such scheme, including an injunction restraining Defendant No.1 from going ahead with the scheme, is barred from the purview and jurisdiction of this court by virtue of Section 430 of the Companies Act, 2013. Under Section 430, no civil court has jurisdiction to entertain any suit or proceeding in respect of any matter which the Tribunal or the Appellate Tribunal is empowered to determine by or under the Companies Act or any other law for the time being in force and no injunction could be granted by any court or authority in respect of any action taken or to be taken in pursuance of any power conferred, by or under the Companies Act or any other law for the time being in force, on the Tribunal or the Appellate Tribunal. It is not in dispute that the Tribunal is presently seized of an application for approval of a scheme of amalgamation submitted by Defendant No.1 as a transferor company with Sprit as a transferee company. It is also not in dispute that

sat 6. ial 4696-2021.doc

the Plaintiff has already filed its objections to the proposed scheme of amalgamation, purportedly on the self-same ground as in the case of the present application for attachment before judgment, namely, that the scheme is nothing but a device to obstruct or delay the execution of the decree that may be passed by this court in the present suit and that, accordingly, it is not in keeping with principles of justice and equity. If that is so, it is exclusively for the Tribunal to decide whether or not to allow such a scheme inter alia on the grounds urged in the present application and there is no question of granting any injunction in respect of such scheme.

4 Secondly, and at any rate, it is a trifle too far-fetched to submit that the scheme of amalgamation between Defendant No.1 and Sprit, which is admittedly a group company of Defendant No.1, and which scheme involves more than 10,000 crores worth of assets and liabilities, is devised only with a view to obstruct or delay the execution of a decree of about 50 or 60 crores that may be passed in favour of the Plaintiff herein. Learned Counsel for the Plaintiff seeks to support his case on the basis of comparison of their respective assets and liabilities, that is to say, assets and liabilities of Defendant No.1, on the one hand and Sprit, on the other. It is commonplace for individual companies forming part of a group to reorganise their business by schemes or arrangements inter alia after taking into account individual assets and liabilities of the concerned companies. The propriety of such scheme, in the present case, is the subject matter of an application pending before the NCLT and besides, as we have noted above, prima facie it would be far-fetched to submit that the scheme is nothing but a device to obstruct or delay the execution of a decree that may be passed in the present suit.

sat 6. ial 4696-2021.doc

5 Apart from Defendant No.1, the attachment before judgment claimed herein is also against Defendant Nos.5 and 6. These Defendants are not parties to the loan agreement or the securities created towards the loan agreement. There is, thus, no case for proceeding even against these Defendants under the present application under Order 38 Rule 5.

6 Accordingly, there is no merit in the interim application. The interim application is dismissed. Costs to be costs in the cause.

7 It is made clear that since the Plaintiff's summons for judgment is pending and would have to be decided on its own merits, these observations, which are only made for deciding the Plaintiff's application under Order 38 Rule 5, shall not in any way prejudice the Plaintiff's case in the summary suit or summons for judgment; the summons for judgment shall be decided on its own merits without reference to these observations.

(S.C. GUPTE, J.) Digitally signed by Sanskruti A.

Sanskruti Thakur A. Thakur Date:

2021.03.19 10:48:39 +0530